Rebalancing Static Super-Replications

Akihiko Takahashi and Yukihiro Tsuzuki
Additional contact information
Akihiko Takahashi: Faculty of Economics, The University of Tokyo
Yukihiro Tsuzuki: Graduate School of Economics, The University of Tokyo

No CIRJE-F-1008, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: This paper proposes a trading strategy that dynamically rebalances static super-replicating portfolios, which is very useful for both investment and hedging strategies. In order to investigate general properties of the strategy, we derive the Doob-Meyer decomposition for the value process without any speci cations of models under the continuous processes of the underlying variables. In particular, we nd that the in- creasing part of the decomposition characterizes the performance of the strategy. Also, we obtain more concrete features for cross-currency and one-touch options based on our general framework. Moreover, nu- merical examples for cross-currency options demonstrate the effectiveness of our strategy for investment and hedging.

Pages: 19 pages
Date: 2016-04
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.cirje.e.u-tokyo.ac.jp/research/dp/2016/2016cf1008.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2016cf1008

Access Statistics for this paper

More papers in CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo Contact information at EDIRC.
Bibliographic data for series maintained by CIRJE administrative office ().